Unfair practices and astoundingly high bank fees continue to heat up debate in the credit card industry. In truth, this can all be summed up into one sentence: consumers are fed up with being constantly robbed off via the "swipe" fees that come with credit card usage. And as more and more consumer advocacy group and business organizations rally against these unfair practices, are the chances of Congress mandating credit card companies to modify their practices and play fair indeed higher?
Every year, apart from the late fees, interest, over the limit charges, and all other sorts of fees that credit card companies charge their consumers, billions of dollars actually go into the pockets of these companies via hidden fees, otherwise known as "interchange fees" or "swipe fees". Interestingly, these hidden fees never make it the monthly statements of their clients.
Aside from this, there is also the issue of credit card merchants being charged by the banks and credit card companies themselves whenever credit or debit cards are used to make transactions. Several major organizations and advocacy groups are rallying to have these interchange fees be reformed as well. These groups include the NRF or the National Retail Federation, the National Restaurant Association, the National Grocers Association, and the Americans for Financial Reform.
Mallory Duncan, the Senior VP and General Counsel of NRF, shares that without regulation, banks have all the freedom to drive prices of goods higher, and this can be done by charging the merchants higher fees for credit card usage. With the higher fees, merchants have no choice but to pass the extra cost off to the consumer market. In turn, every consumer of that particular credit card merchant will have to pay for products at higher prices ¨C everyone, meaning even the ones who pay cash for their purchases.
On the average, swipe fees for both MasterCard and Visa are pegged at roughly 2% of any product's selling price. At first bat, the figure would seem negligible. However, if you look at this from a global perspective, you can just imagine how much these credit card companies earn at the expense of their very own consumers!
These fees should indeed be regulated to avoid unjust practices whose effects we consumers have to endure. Merchants should also be allowed to come up with their own minimum swipe rate so that a fair rate can be determined. However, if it would be impossible to get rid of these swipe fees, then banks and credit card companies should find a better way to use the money earned. Brian J. Donovan, the CEO of Renergie Inc. suggests that the money earned from the fees could be deposited into a Natural Disaster Trust Fund, for instance.